6 Most Bankable Revenue Models for Apps that Every App Developer Should Know

Whenever I ask my enthusiastic and innovative startup clients how they plan to generate revenue from their apps, the most popular answer that I get is a confused or clueless reaction. To clear the confusion once and for all is what motivated me to write this blog. Bootstrap or well-funded startups, with a brilliant idea in head, seeking to make lives around them simpler with an app and obviously for some monetary returns, this blog is a must-read for you.

App monetization defined simply means converting your app into a source of revenue, and there are several ways to do that. These are to monetize the app are called revenue models. There is no straightjacket solution that fits every app, so one has to consider several factors before picking any one of the ways to monetize an app. A “revenue model” can be defined as a framework that states how a business will earn income, generate profit, and make a higher than average return on investment (ROI).

Now, the mobile arena is a very dazzling and fascinating world for new entrants, with already successful apps in the market like WhatsApp, Vine, and Instagram. But, instead of following the glamor, one must concentrate on a sustainable mobile business. To identify the right revenue model, consider answering the following questions:

• What problem does your app promise to solve?
• What makes your app different from the rest?
• Which feature of your app can make users willing to pay?
• What is the prominent revenue model among your competitors, and did that work for them?

Once you are done answering all these questions, you may have a prospective revenue model in hand, but we are not done yet. Consider all the revenue models below with their pros and cons, and then pick the most suitable model for your app. Here are the six most bankable revenue models for mobile applications.

In-App Advertising

This is the most known revenue model and frequently seen in apps. Apps developed on this model are totally free for users and redirect us to advertisers for revenue generation. The goal is to gather a sizable user base and accumulate user data. This collected data is then sorted for relevant information and sold to app publishers, who in turn pay to place targeted ads in the app.

Now, this a great idea, because, as anAdMob survey suggests, 53% of global app users click on the ads in the apps at least some of the time. Also, this is beneficial in monetary terms because the same survey reveals that 60% of global app users recall ads in apps.

Pros

It's a viable model given that free apps entice a lot of downloads, and then it will be convenient to collect user data and sell ad space.

Cons

Besides annoying users, selling ad space can limit your screen size. Also, this model won't work for utility apps that are intended to perform crucial functions because ads make the process slow and inconvenient, which will defeat the purpose of the app in the first place.

Freemium

As the name suggests, freemium apps are offered for free. While the basic features are always free, the user is charged for unlocking premium features. This model is known to work as the user gets the look and feel of the app or a rich preview of the app. The goal is to engage users until they are willing to pay for premium features.

Pros

Starting from the best, it is easy to build up a considerably larger user base, as the basic functionalities are for free. These apps act as bait for people who prefer to try before they buy, and this model can be adapted to almost all verticals.

Cons

Too few features will give an inferior app experience and too many features will make it hard to convince users to pay for additional features, as the app won't give much incremental value. You need to figure out just the right proportion needs to succeed with this model.

Paid Apps

In this revenue model, the user is charged at the point of downloading the app, which simply means this app is sold more like products in the supermarket, as the app is not free to download. In this model, the revenue is made upfront with every download, and to boost up the number of downloads, your app must have perceived value for the money paid, accompanied by an awesome app listing (includes screenshots, five-star reviews, etc.) which makes it stand out from similar free apps.

The backing statistics say that "38% of finance app users who paid to download a finance app reported doing so because the app offered features or functionality unavailable on free alternatives" (Source: Think with Google). Now, there has to be a very strong takeaway in your app to generate revenue and a good app marketing team who can actually make the app stand out, so the app idea for this model should be considered thoroughly.

Pros

The topmost in the list of pros will be the upfront revenue, a straight cut of 30% which is taken away by the app stores. The other pros will be a cleaner interface and a focus on innovation, as paid apps are expected to deliver the best quality services to the users with innovative features.

Cons

Stiff competition from free apps makes it tough for paid apps to survive, which is why paid apps are now having a downturn.

In-App Purchases

The in-app purchase strategy means selling virtual and physical goods within the app. These goods can be real life goods, like the way e-commerce platforms cater to real life needs, or virtual goods like in-game currency or extra lives. This model turns your app into a sales channel, as you are practically selling physical or virtual goods.

Pros

It is best suited for eCommerce and mCommerce brands, giving a high profit margin as there are no expenses like that of brick and mortar stores. In the case of selling virtual goods, a deeper engagement level is achieved by the app.

Cons

Stricter regulations are called for on these apps, as there have been cases reported of kids making accidental in-app purchases. Also, 85% of global app users haven't made an in-app purchase (Source: Think with Google), so one must carefully consider this model before deploying.

Subscriptions/Paywall

The subscription model is basically a “pay later” or “free trial” model in which the user gets to test drive the app, then sign up for a subscription to get access to further services. This model is best suited for apps which are intending to provide services, as it allows for recurring revenue.

Pros

Subscribers are more likely to be engaged, as this model calls for a little fee at varying intervals, like daily, weekly, monthly, or yearly. Also, this ensures recurring revenue to app developers.

Cons

It is hard to figure out when the paywall should be placed. Also, this model has limited application to entertainment, news, and lifestyle apps.

Sponsorship

This model is the latest entrant into the world of app monetization. In this model, advertisers provide users with rewards once they cross a preset threshold in the app. Revenue can be generated by keeping a share of redeemed awards. In this way, advertising can be incorporated into the app while keeping the users happy, as they are rewarded for performing certain in-app actions.

Pros

This innovative model is a win-win for all the people involved, be it advertiser, user, or app developer. Advertisers get the ad space, users get rewarded, and the app developer generates revenue. Besides, this model can be adapted for various verticals.

Cons

Being a nascent revenue model, it is not thoroughly tried and tested, so deploying this model will involve undefined risks.

App monetization strategies should be chosen and built into the app before it is launched in the app store, but that doesn't prevent iterating these strategies if desired. Another notable point is that the above revenue models are not mutually exclusive; one can mix and match them as per their needs.

This article has been taken from: https://dzone.com/articles/6-most-bankable-revenue-models-for-apps-that-every